According to the Vietnam Cement Association, domestic cement consumption this year is expected to be as low as 52.5 million tpa. This is reportedly due to a reduction in the number of local building projects.
Reports show that by mid-July, the cement industry had sold around 26 million t, accounting for 45% of the predicted consumption of between 54.5 – 56 million tpa. The Association has noted that the situation was aggravated by an oversupply throughout the industry, while local and export demand was sluggish.
Currently, the country's cement industry has a total designed capacity of 64 million tpa, spread across 110 production lines. However, many plants do not yet run at full capacity. As a result, this year, total production is expected to reach 57 million t.
In addition to this, there is up to 5 million t of stockpiled cement. To offset reduced local demand and the pressure of inflation, producers were looking to boost exports. This, however, the Association said, has been challenging in itself as export prices were low while transport costs were high. Similar problems last year meant the Vietnam Cement Industry Corporation (Vicem) failed to reach its export target of 1 million t.
The Director of Tam Diep Cement Company, Nguyen Ngoc Sy,õ, said most of his company’s products were sold on the domestic market. He added that it was difficult to break into new foreign markets because the export price was lower that the domestic price.
Dao Ngoc Binh, Director of the Hoang Thach Cement JSC, said there was an oversupply of cement while local consumption had decreased. If firms stopped production they would incur further losses due to high input costs, he added.
Le Van Chung, Chairman of Vicem, said competition among producers would become more intense when production increased. Underscoring this, he added that Vicem planned to open seven cement plants in the near future.
He also said investment in cement projects was normally in hard currencies, which meant repayment of high-interest loans would be a financial burden on producers. He said a number of firms were likely to either default on payments or be forced into mergers.
According to a Vicem report, cement demand would decrease by 1.3%. Vicem's profit reached just 25% of its yearly plan in the first six months of this year. Even large firms such as Bim Son and Ha Tien have incurred losses.
This year, Tam Diep cement plant must repay VND370 billion (US$17.8 million), while Ha Tien must return US$19.3 million. Hai Phong cement meanwhile owes US$11 million and Bim Son cement, US$7 million.